Parabolic SAR Indicator


Parabolic indicator

#Forex indicators , #Forex for dummies

Parabolic is an indicator of technical analysis related to the class of trending. Parabolic was developed by Wells Wilder, a well-known trader who developed many interesting and, most importantly, profitable indicators.

How to use the Parabolic indicator

In the financial markets, traders earn when they enter and exit transactions correctly, that is, they buy cheap and sell expensive. The essence of this dogma is clear to everyone, and in advance. Unfortunately, if you could always clearly follow this simple rule, then all participants in financial activities would be multimillionaires. As we know this is not entirely true, or rather not at all. At all times, traders have searched and will continue to search for that one and only way to find these most important points on the charts for active actions. Wells Wilder, in fact, is no exception, he was also constantly looking for new solutions for profitable trading. And so, Parabolic is a trend indicator designed to search for so-called turning points. The indicator builds arrays of points on the charts of trading instruments.

With a prevailing uptrend, the points are located under the candles, forming a support line. If the market is in a downtrend, dots will be drawn above the candles.

Parabolic SAR Indicator Features

1. If there are large gaps between the points of the indicator, this means that the current movement has great potential to continue. Strong corrections are possible. In this regard, it is strictly not recommended to open positions at such moments of the market, since you can easily catch a stop on an open transaction if a correction starts, that is, a rollback.

2. If the distance between the points is small, this means that, most likely at the moment, the volatility is low, despite the fact that there is still movement. Such market segments may indicate that a reversal is possible soon.

3. If you are trading in a trend, then Parabolic ATS points can be used as guidelines for setting protective orders to close positions, that is, Stop Losses. At the same time, pay attention if you are interested in the “complete capture of the trend”, that is, you want to take the maximum from the movement of the trading instrument, points can be used to move protective orders. That is, when a new point appears, we transfer Stop Loss to its level. In this case, when the stop is triggered, you will receive the maximum profit from the past price movement. The main thing here is not to overdo it, remember, if the point is close to the current price, and the distance to the previous point is insignificant, a rollback or reversal is possible. If the U-turn is good, you will close on time, but if you roll back, then it’s bad, because after it the movement will continue in the same direction again. Summary,

4. Like all trend indicators, the Parabolic Sar works the better, the higher the time frame you use for trading. It is worth trading on it for periods of an hour or more.

5. If you will use it on smaller time frames, always look for confirmation of signals to enter and exit the market. That is, in this case, Parabolic ATS should not and cannot be the only indicator in your trading system.

Adding a Parabolic indicator in MT

Parabolic indicator goes to the standard equipment of MT4 and MT5 trading platforms. To add it to the chart of the trading instrument, open the “Insert / Indicators /” menu .

It is not recommended to change something when trading on this indicator, even if you understand exactly how points are calculated. In fact, when you change the timeframe on the price chart of trading instruments, you change the settings of the indicators, so there is no point in digging inside, so to speak. Nevertheless, there are two settings in the parameters, in addition to the color scheme, namely “Step” and “Maximum”. “Step” – determines the strength of the impact of price changes on the calculation of a new indicator point. “Maximum” – smooths out the influence of “Step” with strong movements on the charts. If you change the “Step”, you must proportionally change the “Maximum”, that is, increase one parameter twice, increase the second as well.

Trading system

You can trade Parabolic Sar in different ways. The easiest way to use it only. If it will trade like this, then use a time frame of at least 1 hour, and preferably 4.

Transaction for sale:

1. The indicator drew four points in a row and they form a declining line, we sell;

2. Stop Loss set 3-5 higher than the first point in the signal block;

3. When forming the return signal, close the deal.

For a purchase transaction, the reverse is true.

A few simple rules in conclusion

Remember, there are no indicators on Forex that are not mistaken. Parabolic-based strategy, like any other, requires confirmation of its signals. When building your own trading system, use several indicators.

Follow Mani Management. Never in one transaction risk more than 2 percent of your capital. This approach will protect you from ruin and allow you to consistently make money on Forex using the Parabolic Sar indicator.

Follow your trading strategy clearly. If according to the Parabolic strategy, you need to open a deal – open, if you record the result – fix it, and it does not matter if you are in the black. Only following the rules of the Parabolic Sar “from and to” will earn money.

Files to download the Parabolic indicator

Parabolic Sar for MT4 can be downloaded here

Parabolic Sar for MT5 can be downloaded here

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1. The risk of loss to an individual as a result of changes in foreign exchange rates (currency risk).

2. The risk of loss to an individual as a result of non-performance, untimely performance or incomplete performance by the Forex dealer and (or) the bank in which the Forex dealer account is opened, financial obligations to such an individual in accordance with the terms of the Agreement and Separate Agreements (credit risk )

3. The risk of loss to an individual as a result of a violation of applicable law and (or) internal documents of a Forex dealer by employees of a Forex dealer, a malfunction (failure) of software and hardware of a Forex dealer and (or) individual, a mismatch of software and hardware of a forex dealer to the nature and volume of transactions it conducts, transactions by a third party on behalf of an individual as a result of receipt by such a person randomly or as a result of his deliberate actions of unauthorized access to the possibility of making such transactions on behalf of an individual, carrying out operations by an individual that are not in accordance with his intentions, for reasons related to insufficient experience of working with this individual with software and hardware of a forex dealer and (or) making it random actions, as well as the result of external events (operational risk).

Contracts or financial instruments proposed for conclusion are highly risky and may lead to the loss of the deposited funds in full. Before making transactions, you should familiarize yourself with the risks associated with them.

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